Morella Corporation Limited

1MC Details

Reinstated on ASX: Morella Corporation Limited (ASX: 1MC) previously, Altura Mining Limited (ASX: AJM) is a resource development company focused on the exploration of lithium and battery minerals. 1MC is involved in exploration project opportunities based in Tier 1 mining jurisdictions in the USA and Australia. The shares of 1MC started trading again on the ASX from 14 December 2021, after the company fulfilled all conditions necessary for capital raising (~$2.00 million) and official reinstatement for a quotation.

Investor Presentation Highlights:

• The company has a portfolio of prospective lithium projects – the Mallina lithium project in Western Australia, the Fish Lake Valley lithium project (Nevada USA), and the Tabalong coal project in Indonesia.
• Globally, there is a fundamental shift towards battery materials as a renewable energy solution for storage and use. The demand for electric vehicles and static storage is driving the demand worldwide. As per S&P Global Platts, the lithium market demand and price outlook is predicted to be strong in 2022 and the long-term. Also, historically, lithium has always been in short supply and the global deficit is expected to increase.

Q1FY22 (ended 30 September 2021) Results:

• 1MC started the formal earn-ins as per the agreement for the Fish Lake Valley project and Sayona (Pilbara Lithium) tenement portfolio with the respective counterparties post the end of Q1FY22.
• At the Fish Lake Valley project, 1MC undertook the review and analysis of historical exploration data. It intends to undertake discussions with Nevada based contractors and consultants who could aid in future fieldwork.
• For the Pilbara lithium portfolio, Syaona and 1MC developed a more comprehensive earn-in contract and aimed to finalise it in the December 2021 quarter. The technical team of 1MC completed a detailed review and analysis of historical exploration work at the Mallina tenement and plans to declare the findings/ results in its next quarterly (Q2FY22) report.

Key Financials; (Analysis by Kalkine Group)

Key Risks: The company faces early-stage exploration risk, availability of skilled labour, COVID-19 protocols, regulatory hurdles, and commodity price and demand changes.

Outlook:

• The commencement of the earn-in opportunities on the aforesaid lithium projects in Tier 1 mining jurisdictions will underpin 1MC’s development strategy going forward.
• Going forward, 1MC plans to undertake and advance on the site-related activities on its projects.

Technical Note: On the daily chart, 1MC prices are sustaining above the horizontal trend line support level. The momentum oscillator RSI (14-period) is trading near an oversold zone at ~38.22 level. The crucial support level for the stock is placed at AUD 0.017, while the key immediate resistance is at AUD 0.022.

Stock Recommendation: The stock of 1MC gave a positive return of ~110.00% in the past month and a negative return of ~66.75% in the past three months. The stock is currently trading above its 52-weeks’ average price level of $0.010 - $0.022. Considering the recent re-capitalisation from the capital raising, expected improvement in liquidity, positive lithium price and demand outlook, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.019, as of 17 January 2022, 10:35 AM (GMT+10), Sydney, Eastern Australia.

Investors with a high-risk appetite should evaluate this stock given the technical support and resistance levels and consider the associated risks of COVID-19, commodity price changes, project commercialisation, and early-stage exploration.

1MC Daily Technical Chart, Data Source: REFINITIV 

Aeon Metals Limited

AML Details

Issuance of Shares to BCA: Aeon Metals Limited (ASX: AML) is an explorer, miner, developer of cobalt and copper projects. On 8 December 2021, AML issued ~3.790 million shares valued at ~A$0.0466 representing ~50% of the commencement fees paid to Bacchus Capital Advisers (BCA) as per the agreement with the balance to be issued in six (6) months. The shares have been issued post the appointment of BCA as the strategic financial adviser to AML (for twelve months initially). BCA has agreed to take a considerable portion of fees in fully paid shares of AML.

Key Takeaways from Q1FY22 (ended 30 September 2021):

• In Q1FY22, the Australian PM declared a ~A$2 billion funding initiative to facilitate critical minerals project development and AML expects its Walford Creek copper-cobalt project to gain from this initiative.
• AML reported witnessing a robust upwards trend in the commodity prices since the start of 2021 in the Walford Creek Project metal portfolio driven by the evolving battery/electrification metal investment thematic. The copper and cobalt prices are reported to be up by ~17% and ~37% on a year-to-date (YTD) basis and are collectively expected to provide for over ~70% of the projected revenue.
• AML entered an agreement with OCP Asia Group to extend the maturity date on its current loan facility to 17 December 2023 (~by 24 months).
• AML drill tested Vardy Deeps target area and waits for the assay results for the drilling of new exploration target.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces early exploration stage challenges of resource estimation, new drill targets, funding for continuous exploration, and COVID-19 risk of labour shortage/movement.   

Outlook:

• The recent geophysical surveys conducted at the Walford Creek project highlighted many new drill targets and regional Tier 1 copper exploration targets. AML plans to compile the updated MRE (Mineral Resources Estimates) received from the Vardy and Marley zones. The updated MREs are planned to be included in the PFS (pre-feasibility study) results.
• The company targets the PFS at the Walford Creek project in Q1CY22, the feasibility study in late CY22. It expects to begin the first production during CY25.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AML gave a negative return of ~29.82% in the past three months and a negative return of ~38.46% in the past six months. The stock is currently trading closer to its 52-weeks’ low level of $0.036. The stock has been valued using the Price to Book Value-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ mean P/BV multiple, considering the continuing net losses, negative operating cashflows, the risk of resource estimation, COVID-19, and commodity prices. For this purpose of valuation, few peers like Titanium Sands Limited (ASX: TSL), Perenti Global Limited (ASX: PRN), Western Areas Limited (ASX: WSA) have been considered. Considering the low trading levels, the discovery of new drill targets at the project, a rising price trend for copper and cobalt prices, valuation on a TTM basis, decent outlook, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.040, down by ~2.440%, as of 17 January 2022.

AML Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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